By Helen Reid
LONDON (Reuters) -With the end of a U.S. tariff exemption for small parcels on Friday, some retailers have stopped selling to customers in the United States while others are seeking temporary workarounds in the hope the tariff rate may be reduced.
The removal of “de minimis” – duty-free treatment of e-commerce packages worth less than $800 – for products originating from China and Hong Kong exposes those goods to tariffs of 145% on most Chinese goods following U.S. President Donald Trump’s decision last month. The move upended global trade and triggered retaliation from Beijing.
British beauty products retailer Space NK has paused e-commerce orders and shipping to the United States “to avoid incorrect or additional costs being applied to our customers’ orders”, the company said in a notice on Wednesday.
It is not alone. Understance, a Vancouver-based company that sells bras and underwear manufactured in China, told customers in an Instagram post that it would no longer ship to the United States due to the tariffs, saying it will resume once there is clarity.
“We’re going from zero to 145%, which is really untenable for companies and untenable for customers,” said Cindy Allen, CEO of Trade Force Multiplier, a global trade consultancy.
“I’ve seen a lot of small to medium-sized businesses just choose to exit the market altogether,” she added.
PRICE HIKES UNDERWAY
Players willing to continue to access the U.S. market are forced to hike their price tags.
Oh Polly, a British clothing retailer, has increased prices in the U.S. by 20% compared to its other markets, and may have to consider further price increases because of the higher tariffs, said managing director Mike Branney.
Singapore-based fast-fashion giant Shein sought to reassure customers in a post on its U.S. Instagram account on Thursday, saying: “Some products may be priced differently than before, but the majority of our collections remain as affordable as ever.” Shein sells clothes mostly manufactured in China, and the U.S. is its biggest market.
Temu, the international arm of Chinese e-commerce giant PDD Holdings, prominently featured products already in U.S. warehouses on its website, labelled ‘Local’, and a pop-up informed customers there would be no import charges for local warehouse items.
“All sales in the U.S. are now handled by locally based sellers, with orders fulfilled from within the country,” Temu said in a statement, adding that its pricing for U.S. customers “remains unchanged”.
But items imported before the May 2 change will eventually run out. Both Shein and Temu have slashed their U.S. digital advertising spending in the past weeks as they prepared for the change that is likely to hit their sales.
Shein did not immediately reply to a request for comment.
“E-commerce companies have had it really good for a really long time, and this is a seismic shift in how trade works,” said Hugo Pakula, customs expert and CEO of trade automation platform Tru Identity. “If your inventory is not already in the U.S., selling to the U.S. is going to hurt.”
De minimis was initially introduced to smooth international trade, but became the target of bipartisan criticism due to its role in facilitating smuggling of fentanyl ingredients from China and fuelling a surge in imports of cheap clothes, toys, and furniture made in China through online platforms like Temu, Shein, and Amazon Haul.
De minimis has also been a channel for counterfeit goods. In 2024, de minimis shipments accounted for 97% of the intellectual property infringement-related cargo seizures made by Customs and Border Protection.
Without de minimis, sellers of goods made in China have to provide U.S. customs with more detailed information about where each component of their product is made, an increased administrative burden that, along with the huge tariff cost, is dissuading small retailers.
UPS CEO Carol Tome said on Tuesday that many of the delivery firm’s small to medium-sized business customers source 100% of their goods from China.
U.S. online marketplace Etsy said in a notice to sellers earlier this month that it was making it easier for them to clarify the country of origin of their products, as tariffs are applied based on where a good is made rather than where it is dispatched from.
While disruptive to ecommerce, the end of de minimis treatment of Chinese goods could give a boost to retailers less reliant on ecommerce or on Chinese manufacturing.
British fast-fashion retailer Primark, which sells clothes to U.S. customers only through its stores across the country, not online, said it could benefit from the change.
“With prices going up from this part of the trade, I wonder if some Americans might start going back to shopping centres to find value there,” George Weston, CEO of Primark owner Associated British Foods, told Reuters on Tuesday.
(Reporting by Helen Reid, additional reporting by Amy Tennery, Lisa Baertlein, James Davey; Editing by Lisa Jucca, Anna Driver and Emelia Sithole-Matarise)
